Economic Development Authority in and for the City of Brooklyn Center, Respondent, vs. Hmong-American Shopping Center, LLC, Appellant, Western Bank, et al., Respondents Below.

Economic Development Authority in and for the City of Brooklyn Center, Respondent, vs. Hmong-American Shopping Center, LLC, Appellant, Western Bank, et al., Respondents Below. A05-1239, Court of Appeals Unpublished, May 9, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1239

 

Economic Development Authority

in and for the City of Brooklyn Center,

Respondent,

 

vs.

 

Hmong-American Shopping Center, LLC,

Appellant,

 

Western Bank, et al.,

Respondents Below.

 

 

Filed May 9, 2006

Affirmed Hudson, Judge

 

Hennepin County District Court

File No. CD 2759

 

Marc J. Manderscheid, David H. Grounds, Briggs and Morgan, P.A., 2200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402 (for respondent)

 

Steven A. Sondrall, Clarissa M. Klug, Jensen & Sondrall, P.A., 8525 Edinbrook Crossing, Suite 201, Brooklyn Park, Minnesota 55443 (for appellant)

 

            Considered and decided by Klaphake, Presiding Judge; Hudson, Judge; and Collins, Judge.*

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

On appeal in this condemnation action, appellant Hmong-American Shopping Center, LLC, argues that the district court erred in granting the condemning authority's condemnation petition.  Specifically, appellant contends that the proposed use for the acquisition property was too speculative to establish the necessity for the taking.  Because the record supports the district court's finding that the condemning authority demonstrated the necessity for the taking and did not act arbitrarily or unreasonably, we affirm.

FACTS

This case concerns the government acquisition of a commercial property located north of 57th Street, west of Logan Avenue, and southwest of Minnesota Highway No. 100 in Brooklyn Center, Minnesota.  Respondent, the Economic Development Authority of Brooklyn Center (EDA), is the condemning authority in this matter.  The acquisition property ("the property") is within the respondent city's Modified Redevelopment Plan for Housing Development and Redevelopment Project No. 1.  The property and an adjacent commercial property constitute the "57th Street and Logan Redevelopment Area."  The property, formerly known as the Northbrook Shopping Center, was acquired in April 2000 by Chao Fong Lee and is now referred to as the Hmong-American Shopping Center, LLC (HASC).  The property consists of four single-story retail buildings constructed between 1955 and 1969.  According to respondent, the area exhibits dilapidation, deferred maintenance, a layout that is not conducive to modern retail standards, excessive vacancy, and constitutes a blighting and negative influence on the adjacent neighborhood.  Similarly, appellant acknowledged that the parcels had been "challenged property" over time, suffered from significant vacancies, and were in need of redevelopment.

            In 2002, appellant approached the EDA to discuss redevelopment of the property.  The EDA is a public body corporate and politic, duly organized and existing with the power to engage in development and redevelopment activities, including eminent domain, under Minnesota Statutes §§ 469.090 through 469.1082 and related statutes.  Originally, appellant proposed development of a new multi-tenant Asian-American-themed retail area.  The EDA commissioned a market study, which concluded that the property was too small, even when the adjacent commercial parcel was included, to accommodate this new commercial concept.  The EDA then commissioned environmental studies and continued to investigate other viable redevelopment of the property.

            By mid-2004, the EDA and appellant concluded that the most feasible redevelopment would be the construction of residential townhomes and condominiums, with a small retail component.  In late summer 2004, the EDA learned that the adjacent commercial parcelthe parcel at the northwest corner of 57th and Loganhad been sold to a new owner.  On September 27, 2004, the Board of Commissioners of the EDA authorized the acquisition of the adjacent parcel and subsequently acquired that parcel through negotiated purchase.

            In a November 3, 2004 memorandum to the city manager, the EDA community development director stated that after acquisition of all parcels, razing of the structures, and preparation of the site (primarily soil-contamination cleanup), he anticipated the EDA "would be able to solicit development proposals by the summer of 2005."

On November 8, 2004, the EDA held a public hearing concerning the proposed acquisition of appellant's property, which consisted of all remaining parcels in the 57th and Logan redevelopment area.  An attorney representing both the HASC and Lee spoke in support of the proposed resolution to acquire the property by condemnation so that redevelopment could occur.

The EDA Board then resolved:

1.  The EDA hereby determines that it is in the public interest and is necessary for purposes of proceeding with a proposed redevelopment of the 57th and Logan Redevelopment Area, for the EDA to acquire through negotiation with the property owner or by eminent domain the Acquisition Parcels as described above.

 

2.  The acquisition of the Acquisition Parcels is hereby determined to be necessary to carry out a redevelopment project and to fulfill the goals and objectives of the Redevelopment Plan for Housing Development and Redevelopment Project No. 1, which plan is hereby modified as necessary to provide for the acquisition of the Acquisition Parcels.

 

3.  The acquisition of the Acquisition Parcels is reasonably necessary for and fulfills the public purpose of assisting to eliminate a blighting influence, provide for an increase in the tax base, and will result in an improvement to the health and welfare of the citizens of Brooklyn Center.

 

4.  For the reasons set forth herein and because of a concern that delays in the assemblage of the properties located with the 57th and Logan Redevelopment Area will delay private redevelopment, the EDA hereby deems it necessary to proceed without delay under Minn. Stat. § 117.042. . . .  The EDA hereby [authorizes legal counsel to] use the "quick take" procedure in acquiring title to the Acquisition Parcels.

 

EDA Resolution No. 2004-12 (Nov. 8, 2004).

Accordingly, on November 9, 2004, the EDA sent a purchase agreement to appellant reflecting an appraised fair market value of $3,000,000.  On December 28, 2004, the EDA petitioned the district court for condemnation of appellant's property.  In a March 2005 hearing before the district court, a co-owner and tenant of the HASC testified that the acquisition parcels had been "challenged property" and were in need of environmental remediation, title work, and redevelopment.  Another owner, Chao Fong Lee, testified that he was willing to compete for the opportunity to be the developer of the redevelopment parcels.  The EDA's community development director, in addition to testifying to the process and authority under which the EDA had acted, testified that the EDA subsidy for the 57th and Logan redevelopment project came from tax-increment financing (TIF) and that the TIF monies had to be spent by May 14, 2005, or they would be returned to the county or used by the city to pay debts of the TIF district.

In an order dated April 26, 2005, the district court granted the EDA's condemnation petition.  The district court found that both "the EDA and [appellant] [had agreed] that the EDA must obtain the Acquisition Parcels, if redevelopment is to occur."  The district court concluded that "[t]he proposed acquisition of the Real Property by the EDA serves a public purpose in that it will eliminate a blighting influence and permits the EDA to move forward with redevelopment of the real property."  The EDA deposited the sum of $3,000,000 to acquire the property.  This appeal follows.

D E C I S I O N

            Appellant argues that the EDA failed to establish necessity for the taking, thus the district court erred in upholding the EDA's findings.

The Minnesota Supreme Court has recently stated that

[b]efore condemning private land, a condemning authority . . . must determine that there is a public use for the land and that the taking is reasonably necessary or convenient for the furtherance of that public use.  Although we have said that questions of public use and necessity are "judicial questions," the scope of judicial review of the condemning authority's determination of these questions is actually narrower than that characterization might imply.  This is because the determinations of the condemning authority are regarded as legislative decisions which will be overturned only when they are "manifestly arbitrary or unreasonable."  Thus, there are two levels of deference paid to condemnation decisions: the district court gives deference to the legislative determination of public purpose and necessity of the condemning authority and the appellate courts give deference to the findings of the district court, using the clearly erroneous standard.

 

Lundell v. Coop. Power Ass'n., 707 N.W.2d 376, 38081 (Minn. 2006) (citations and footnote omitted).  Thus, the burden of showing reasonable necessity or convenience for the taking is on the condemning authority.  Id. The district court then reviews the legislative decision to ensure that it was not made in a manifestly arbitrary or unreasonable manner.  Id.at 381.  Finally, the appellate court determines whether the district court clearly erred in its findings on whether the condemning authority met its burden.  Id.

            When determining whether a district court's finding of fact is clearly erroneous, an appellate court "takes the view of the evidence which is most favorable to the trial court's findings" and defers to district court credibility determinations.  Trondson v. Janikula, 458 N.W.2d 679, 682 (Minn. 1990); Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).  This court will not rule the finding clearly erroneous unless we are "left with the definite and firm conviction that a mistake [was] made."  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (quoting Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987)).

Appellant does not dispute the district court's finding that the clearing of blight is a public purpose.[1]  Appellant argues instead that the EDA failed to provide any factual support that the taking was necessary.  Appellant bases this argument on EDA's concession at the hearing that there was no definite use, plan, or design concept for the land beyond the acquisition, demolition, and remediation of the property to prepare it for redevelopment.

            Although the condemning authority has the burden of proving that a taking is necessary, Regents of Univ. of Minn. v. Chi. & Nw. Transp. Co., 552 N.W.2d 578, 580 (Minn. App. 1996) (citation omitted), review denied (Minn. Nov. 20, 1996), it need not prove absolute necessity, but must merely establish that the condemnation is "reasonably necessary or convenient for the furtherance of a proper purpose."  City of Duluth v. State, 390 N.W.2d 757, 76465 (Minn. 1986).  For the purpose of eminent domain, "necessity" means "now or in the near future."  Regents, 552 N.W.2d at 580 (quotation omitted).  "Speculative purposes will not support the assertion of necessity," and a city may not stockpile property.  See id.  But "public purpose and necessity cannot be thwarted . . . by alleging that the purpose for condemning the property is too speculative if in fact the project is officially supported by the governmental entity and ordinary agreements are in place to realize the project."  In re Minneapolis Cmty. Dev. Agency (MCDA) v. Opus Nw., L.L.C., 582 N.W.2d 596, 597 (Minn. App. 1998).

Appellant relies on Regents for the proposition that the condemning authority must have a final design concept before eminent domain can be utilized to take a blighted property.  In Regents, the University of Minnesota wanted to acquire certain contaminated land owned by a railroad, and, when the railroad accepted an offer for the land made by another entity, the university sought to quickly condemn the land.  Regents, 552 N.W.2d at 57980.  The district court dismissed the petition, "concluding in part that the proposed condemnation was not ‘necessary,' due to the University's failure to articulate a purpose for which it intended to use the property."  Id.at 580.  This court, in affirming the district court's findings, stated:

First, the record indicates that the University has not included this property on its master plan for its anticipated development of the Twin Cities campus.  Second, although the University claims to have at least three potential uses for the land, the uses are mutually exclusive, and the Board of Regents has not yet approved a single project for the property.  Finally, because of soil contamination problems, it is undisputed that the University could not currently use the property for any of its proposed uses.  The parties have not yet agreed on a remediation plan; decontamination of the property will require from approximately two to seven years to complete.  At least one University official has described the time period before the University would use the property as "potentially indefinite."  Based on this combination of factors, we conclude that the trial court did not clearly err in finding that the University had failed to demonstrate the required level of necessity for condemnation.

 

            The University may well have the right to purchase this property, but it cannot acquire it for speculative future use (stockpiling) by condemnation.

 

Id. (emphasis added).  Thus, in Regents, the University of Minnesota failed to demonstrate necessity when: (1) the land was not included in a development plan; (2) no specific use for the land had been approved; (3) there was no plan to remediate the environmental damage; and (4) the "potentially indefinite" period after condemnation before the land would be used meant that it might never be used. 

This court has previously recognized that the facts in Regents were peculiar.  See Itasca County v. Carpenter, 602 N.W.2d 887, 890 (Minn. App. 1999) (noting that "[t]he rule established in Regents . . . is limited by the extreme facts present in that controversy").  Moreover, the instant case is distinguishable from Regents on several grounds.  First, under the clearly erroneous standard of review, an appellate court must give deference to the findings of the district court.  Fletcher, 589 N.W.2d at 101.  In Regents, this court gave deference to the district court's determination that the university failed to demonstrate necessity.  Here, we must give deference to the district court's findings and ultimate conclusion that the EDA sufficiently demonstrated necessity.  Further, unlike Regents, the district court here found that: (1) the acquisition parcel was included by the EDA in the Modified Redevelopment Plan for Housing Development and Redevelopment Project No. 1; (2) the board of commissioners of the EDA had adopted a resolution finding that it was in the public interest and was necessary for the EDA to proceed with the proposed redevelopment and to acquire the property through negotiation or by eminent domain; (3) the board further resolved that the acquisition was reasonably necessary for and would fulfill the public purpose of assisting to eliminate a blighting influence, provide for an increased tax base, and improve the health and welfare of the citizens of Brooklyn Center; (4) Phase II environmental studies had been completed and the EDA had both a plan and timelineof less than a yearfor razing the buildings and remediation of the environmental damage; and (5) both the EDA and appellant had agreed that if redevelopment was going to occur, the EDA needed to obtain the acquisition parcels.  On this record, the district court did not clearly err when it concluded that the EDA's finding of necessity was not manifestly arbitrary or unreasonable.

The only similarity with Regents is the lack of a finalized and specific use for the land after the removal of blight and environmental contamination.  But Regents does not require that a final design concept be in place before eminent domain can be employed.  Rather, in making the "necessity" determination, the Regents court considered a combination of factorsof which specific use of the acquisition propertywas just one.

Our holding is also supported by the statutory authorizations and powers afforded housing-and-redevelopment authorities.  Minn. Stat. §§ 469.001.012 (2004).  In its enabling resolution, the EDA was provided with "all of the powers conferred by law upon a Housing and Redevelopment Authority of the City."  Brooklyn Center City Council Resolution No. 87-170 (Aug. 24, 1987).  Minnesota statutes provide that an authority may "by the exercise of the power of eminent domain, in the manner provided by chapter 117, acquire real property which it may deem necessary for its purposes, after the adoption by it of a resolution declaring that the acquisition of the real property is necessary . . . to carry out a redevelopment project." Minn. Stat. § 469.012, subd. 1g (2004).  One definition of a "redevelopment project" is "any work or undertaking" to acquire "blighted areas and other real property for the purpose of removing, preventing, or reducing blight, blighting factors, or the causes of blight."  Minn. Stat. § 469.002, subd. 14(1) (2004).  Unlike other types of redevelopment projects, the removal of blight does not specifically require a "redevelopment plan."  See Minn. Stat. § 469.002, subd. 16 (2004) (defining a redevelopment plan as "a plan approved by the governing body . . . [which] provides an outline for the development or redevelopment of the area and is sufficiently complete (1) to indicate its relationship to definite local objectives as to appropriate land uses; and (2) to indicate general land uses and general standards of development or redevelopment").  And even if a redevelopment plan was required, the statute does not support appellant's argument that a final design concept is required.  Here, the EDA only needed to show that the condemnation of the property was reasonably necessary or convenient for the redevelopment projectthe removal of the blighting influence.  The EDA made that showing.

The record shows that EDA's stated purpose for the 57th and Logan Redevelopment Area was to remove the economically obsolete and blighting influences of the buildings located on the property, create new development opportunities, and increase the city's tax base.  The record also shows that the property had, in fact, a blighting influence on surrounding properties.  The buildings were old and in ill-repair, and the property was in need of more than $1,000,000 in repairs to bring it into compliance with the city code.  Appellant had expressed interest in redeveloping the property, and appellant's witness testified that the acquisition parcels had been "challenged property" over time, suffered from significant vacancies, and were in need of redevelopment.  Because some of the retail tenants had contracted for long-term lease extensions, appellant had acknowledged that the EDA would have to clear the title prior to any redevelopment.  The property was also in need of environmental remediation.  Further, the EDA had already purchased the adjacent parcel, demonstrating its commitment to redeveloping this specific area.  The EDA also planned to solicit further development proposals after the buildings were razed and the site prepared.  Finally, nearly three years of negotiations with appellant had failed to result in agreement regarding redevelopment, and the EDA was concerned that any further delay in acquiring the property would delay redevelopment significantly because the TIF funding period would soon expire. 

We conclude that the EDA's immediate use of the propertyremoving a blighting influence and environmental remediation to prepare the site for private redevelopmentwas not speculative.  Viewing the record in the light most favorable to the district court's findings, there is sufficient support for the district court's conclusion that the EDA did not act in a manifestly arbitrary or unreasonable manner when it found the taking necessary to remove the blighting influence of appellant's property.

Affirmed.

* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.

[1] The terms "public purpose" and "public use" are treated interchangeably in condemnation proceedings.  See Lundell v. Coop Power Ass'n., 707 N.W.2d 376, 380 n.2 (Minn. 2006) (noting that "[t]he ‘public use,' or more frequently called the ‘public purpose,' element comes directly from Minn. Const. Art I § 13"); City of Duluth v. State, 390 N.W.2d 757, 763 (Minn. 1986) (stating that "[h]istorically, the court has used the words ‘public use' interchangeably with the words ‘public purpose'").